Tue, 20 Nov 2018
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Moodys: Italy bonds now one step away from junk status

By Jay Jackson, Denmark News
21 Oct 2018, 12 GMT+10

NEW YORK, New York – Moody’s has downgraded Italy’s sovereign debt rating once more, taking it a step closer to being rated junk.

“The Italian government’s significantly higher budget deficit targets for the next three years will keep its public debt at a high 130% of GDP, a level that makes Italy vulnerable to future economic shocks. Despite a short-lived boost to growth from fiscal stimulus, the government’s economic plans will not allow it to tackle the country’s low growth, which will move back to the trend rate of 1% at best,” Moody’s in a statement said Friday. 

The rating was lowered one notch to “Baa3” from “Baa2.” The outlook going forward, said the ratings agency is ‘stable.’

Italy has budgeted for a deficit of 2.4% of GDP in 2019, triple what the previous estimate was.

With its economy floundering, Italy has insisted it needs to increase spending to get it moving again.

“Most of the government’s spending increases are structural in nature, implying that they will be difficult to reverse,” Moody’s said in its statement.

“The economic plans of the government, while supportive of growth in the near term, do not amount to a coherent program of reforms that will lift Italy’s mediocre growth performance on a sustained basis.”

The budget is subject to the approval of the European Commission which is in discussions with Italy over it.

Standard & Poor’s is due to review Italy’s rating on Friday (26 October 2018).

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